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How does bankruptcy-counseling work?

If you have decided that personal bankruptcy is the right choice for you to get out of that an unmanageable debt situation, before you can discharge your debts under Chapter 7 or arrange a payment plan under Chapter 13 you will need to comply with some additional requirements imposed by the U.S. Bankruptcy Code. These are credit counseling and debtor education.

This post provides an overview of credit counseling and debtor education requirements under bankruptcy law, but you should not treat it as a comprehensive treatment or as any kind of legal advice. To learn more about how these two extra steps work in a bankruptcy, you can contact a Kentucky law firm that practices in bankruptcy and debt relief cases.

Credit counseling. Credit counseling is not just an alternative to bankruptcy; under the law, it is also a part of it. You may still need to take credit counseling within 180 days before the bankruptcy court will allow you to file a petition. This is to ensure that you have really considered your decision, and that you know about other debt relief alternatives to bankruptcy. You can take credit counseling in a number of ways: in person, by telephone or online, as long as the credit counseling organization is approved by the U.S. government.

Debtor education. The prerequisites to using bankruptcy protection do not stop with credit counseling. After you have completed that counseling and filed your bankruptcy petition, another step that you will need to undertake is debtor education. This is similar in many ways to credit counseling -- you can usually complete it within a day, often within one or two hours -- and you can take it personally, telephonically or online and from a government-approved provider. 

Debtor education is distinct from credit counseling in that counseling is a prerequisite before you can file your petition, while education is prerequisite before your debts may be discharged.

For both credit counseling and debtor education, upon successfully completing the training you will receive a certificate evidencing such completion.

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